Under its new deal with Tesla Motors, Daimler will help engineer the Model S, increasing its performance.

In exchange, Tesla Motors will help Daimler produce and develop the battery packs and systems for its 2012 Smart Car ED followup. (Source: CarPages UK)

New move provides big boost for one of the few currently-producing electric vehicle makers

While many car companies, including GM, Chrysler, and Ford are cooking up plans for electric vehicles, Tesla Motors is actually making them and selling them. Despite a rocky 2008 which saw many layoffs and close calls financially for the company, it succeeded in bring its Roadster to the U.S. market.

Now at a special press conference in Mercedes-Benz Museum in Stuttgart, a surprising and intriguing announcement was made -- Daimler, former owner of Chrysler and owner of the Mercedes-Benz brand, is buying a 10 percent stake in the company. More importantly, Daimler will help Tesla with engineering and parts development. Dr. Thomas Weber, the head of research and development for Mercedes-Benz, was on hand to make the announcement.

He stated, "Our strategic partnership is an important step to accelerate the commercialization of electric drives globally. As a young and dynamic company,Tesla stands for visionary power and pioneering spirit. Together with Daimler's 120 years of experience in the automotive sector this collaboration is a unique combination of two companies' strengths. This marks another important milestone in Daimler's strategy for sustainable mobility."

Tesla CEO Elon Musk also was on hand and cheered the news. He would not reveal how much his company had received from Daimler, other than to comment that it was in the double-digit millions. This indicates that Daimler's valuation of Tesla to be worth at least $100M USD, a promising sign for the recovering company.

The match seems made in heaven, with both companies focusing heavily on performance vehicles and fuel economy, two sometimes divergent fields. Daimler will help engineer Tesla's new Model S sedan, while Tesla will help Daimler make a second generation Smart ED electric compact. Tesla will engineer the battery packs, which use Li-Tec lithium ion cells developed by a Daimler and Evonik joint venture. Tesla will also have access to the cells for its own vehicles. The cells are currently scaling to mass production, which should help Tesla be able to produce vehicles quicker.

Looking forward, Daimler plans on having Tesla help it with battery pack integration and battery management systems for its electric vehicles. The first Tesla-tweaked Smart car will arrive in 2012, with five-digit production planned. Daimler's Prof. Herbert Kohler (who is in charge of e-drive systems at the German automaker) will take a board position at Tesla and oversee their progress.

With the investment Daimler looks to gain the edge it needs to beat its American EV competitors. And with the stake, Tesla can finally lay to rest questions of its short-term survival.

"Intel is investing heavily (think gazillions of dollars and bazillions of engineering man hours) in resources to create an Intel host controllers spec in order to speed time to market of the USB 3.0 technology." -- Intel blogger Nick Knupffer